Belgian export credit agency Ducroire/Delcredere’s (OND) country ceiling for the insurance of medium and long-term transactions (credit period exceeding one year) and special transactions with Russia has been increased from €300mn to €450mn. From now on, OND is ready to provide insurance for political and commercial risks related to transactions with Russian private buyers in open account, ie, without a bank guarantee being required. A bank or sovereign guarantee is still required, however, for transactions with public buyers.
Russia’s remarkable macroeconomic record after the 1998 crisis has strongly reduced the country’s vulnerability to external shocks. The budget as well as the current account of the balance of payments have shown a surplus over recent years. The external debt situation has become far more sustainable and foreign exchange reserves are at the highest level since 1989. However, action is needed to curb the real exchange rate appreciation, as it weighs on the economy’s long-term growth potential. To this end, a more restrictive fiscal policy is most welcome, despite great political temptation to spend the current excess receipts. Structural reforms should moreover be reactivated, after pre-electoral slowdown and increased resistance by various interest groups in 2002.
The main risk to an otherwise rosy outlook is the possibility of a sharp and sustained decrease in energy prices on the international markets, which could derail the Russian economy. In such case, a contraction of fiscal policy and an exchange rate correction could become inevitable to limit damages to the economy. But, given Russia’s current strength, even sharp exchange rate depreciation would not significantly affect the risk of payment default.